Obamacare: This is going to hurt

As more and more of the Affordable Care Act takes effect, its many negatives are becoming harder to deny. Sen. Max Baucus, the Montana Democrat who was a key author of the law known as “Obamacare,” recently fretted it was on course to be a “train wreck.” This is the first of the U-T San Diego Editorial Board's six-part look at all the ways the much-trumpeted overhaul of the U.S. health care system has gone awry.

On March 23, 2010, President Barack Obama signed into law what he billed as a triumphant reform of American’s health care system.

Two days later, in a speech at the University of Iowa, the president declared, “From this day forward, all of the cynics, all the naysayers — they’re going to have to confront the reality of what this reform is and what it isn’t. ... They’ll see that if Americans like their doctor, they’ll be keeping their doctor. You like your plan? You’ll be keeping your plan. No one is taking that away from you. ... It wasn’t Armageddon.”

“If you already have insurance, this reform will make it more secure and more affordable. ... Costs will come down for families, and businesses, and the federal government, reducing our deficit by more than $1 trillion over the next two decades. That’s what reform is going to do.”

Flash-forward to spring 2013: As we prepare for Obamacare’s primary elements to kick in on Jan. 1, the vast chasm between the president’s claims and unfolding reality produces a constant stream of ominous headlines.

It is not true that if “Americans like their doctor, they’ll keep their doctor.” The Congressional Budget Office predicts a minimum of 7 million Americans will lose their employer-provided coverage because of Obamacare.

This is also why it is not true that insurance will be “more secure” for those who already have it.

The claim that insurance will be “more affordable” is also not true for the vast majority of middle-class Americans. Obamacare mandates a sharp increase in what health insurance policies must cover. A recent study found that less than 2 percent of health plans meet the law’s “community standards.” The broader the coverage, the more expensive. The Milliman actuarial firm predicts premiums will go up 22.2 percent for Californians not eligible for federal subsidies.

Nor is it true that health-insurance “costs will come down” for businesses. Instead, private firms are broadly turning to part-time workers to avoid having to pay Obamacare’s costly mandates. Consider the implications of this fact: From January 2012 to January 2013, 200,000 retail jobs were added in the U.S., but the total number of retail hours worked went down. Data suggest the trend is accelerating. This is why the stock prices of companies that handle temp workers are soaring.

Nor is it true that health-insurance “costs will come down” for the federal government. In March, the CBO estimated Obamacare’s cost over its first 10 years at $1.2 trillion in additional spending beyond what the U.S. now spends on health programs.

While the negative developments on so many Obamacare fronts are so contrary to what the president and his supporters forecast, few are surprising — and most were predicted by critics years ago.

Why? Because at an utterly basic level, Obamacare is built on rules that give incentives to companies to not provide health insurance and on rules that give incentives to individuals to not buy health insurance if they can’t get coverage through work.

This is both crazy and baffling. Incentives are supposed to be used to encourage good outcomes, not bad ones. As the Harvard Business Review puts it, “Organizations and societies rely on fines and rewards to harness people’s self-interest in the service of the common good.”

Beginning Jan. 1, the Affordable Care Act requires most businesses to either provide their workers with health insurance coverage or to pay a fine. People without health insurance from their employer will be required to buy coverage, with government subsidies for the poor and less affluent.

It will cost employers far less to pay the small fine for not providing insurance than to provide insurance, which drives the CBO’s estimate of at least 7 million people losing insurance coverage.

Affordable Care Act: Broken promises

A series of editorials on the Obama administration's overhaul of the U.S. health-care system.

It will cost individuals far less to pay the small fine for not buying insurance than to buy coverage. People also have a second incentive not to buy health insurance. Under Obamacare, they can’t be denied coverage for pre-existing conditions – so they don’t need to buy insurance until they get sick.

After Jan. 1, when individuals who are newly required to buy insurance figure out it’s cheaper — and has little consequence — to go without insurance, these incentives are likely to influence millions of people.

Given that the president’s stated goal was to make our health care system much more robust and inclusive by extending health insurance to nearly all, these contrary incentives are perverse.

The ACA’s flaws are so fundamental and so immense that it’s difficult to even give the president and congressional Democrats credit for good intentions. Obamacare is an abomination that needs a vast overhaul. And even then it might not be salvageable — or worth salvaging.